Austrian labour law provides three possibilities of termination of employment by the employer:
- (ordinary) termination by providing notice (Arbeitgeber-Kündigung)
- mutual termination (einvernehmliche Auflösung)
- dismissal (immediate termination for cause without notice period – Entlassung)
An important distinction in terms of the termination possibilities must be made between employments of indefinite duration and fixed-term employments . While employments of indefinite duration can be terminated in all three available forms, fixed-term employment contracts can be terminated prematurely only by consent or by dismissal for good cause (unless provided differently in the individual employment contract). A fixed-term contract ends automatically through expiration of the term at the date fixed in the employment contract. If the employee continues to work beyond the date on which the contract is to end with the employer's consent and if a new term is not agreed, the contract of employment becomes one of indefinite duration. It is therefore very important to monitor the termination date of fixed-term employments and send a written notice that services are not requested by the employer beyond that date, if the relationship is to be discontinued.
Special rules exist with respect to termination during a validly agreed upon trial period. During the trial period, either party can terminate the employment without cause and without observing any special periods or dates of notice. Such trial periods can, however, only be validly agreed upon for periods not exceeding one month.
Procedures For Terminating the Agreement
Where 5 or more employees are to be dismissed within one month, the regional employment bureau has to be informed at least 30 days before notice is given (Kündigungsfrühwarnsystem) .
If a works council exists, it has to be informed before any termination and can give an opinion within one week. If the works council disagrees with the termination or does not give an opinion, either the works council or the affected employee can appeal against the termination at the Labour and Social Court. If the works council agrees, only the affected employee can appeal against the termination. An appeal against termination is only possible for certain reasons (for example if the termination of the employment contract is not in accordance with the social employment rules concerning elder employees).
An employer can terminate the employment relationship by dismissal where there are serious grounds, such as misappropriation, corruption, incapability, competing against the employer or violence against the employer, his relatives or other employees.
The employee can appeal against such a dismissal at the Labour and Social Court. Even if the employee succeeds with his appeal, the employment relationship is still terminated. However, in that case the employer will be required to pay the amount it would have had to pay when acting in compliance with the appropriate notice period.
The Employment Act contains specific provisions on immediate termination. Section 26 of the Employment Act provides that the employee is entitled to immediately terminate the employment particularly in the following instances:
- if the employee becomes physically (or mentally) incapable of continuing work or cannot continue his service without damaging his health;
- if the employer does not pay its salary properly or violates other essential obligations of the employment contract;
- if the employer does not comply with its occupational safety and health obligations; or
- if the employer commits an act of violence, an immoral act, or makes severe insults against the employee or his relatives, or the employer does not protect the employee against such acts committed by other employees or relatives of the employer.
Conversely, the employer may immediately terminate the employment particularly if the employee is guilty of gross misconduct (Section 27 of the Employment Act):
The employee can generally always resign, assuming the contract is not for a fixed term. The employee has to comply with any legal and contractual notice when resigning. According to the Employment Act (Angestelltengesetz – AngG) employment agreements may only be terminated by the employee at the end of each month under observing a notice period of one month (otherwise agreeable).
Termination On Notice
Ordinary termination usually does not require any cause but is regularly subject to notice periods that depend on the length of the employment. Both employer and employee can terminate the employment relationship on notice. According to the Employment Act (Angestelltengesetz – AngG) minimum periods of notice and termination dates have to be observed. Statutory minimum periods of notice override contractual notice periods. The minimum period of notice depends on the duration of the employment relationship and increases with the length of the relationship.
According to the Employment Act employment agreements may only be terminated by the employer at the end of each quarter. However, the parties can agree that the termination date may also be the 15th, or the last day of each month.
According to the Employment Act (Angestelltengesetz - AngG) , the employer must respect the statutory notice periods in case of termination of white-collar employees from 6 weeks up to 5 months, depending on the years of service.
According to the statute, the employment can only be terminated effective at the end of each calendar quarter. This rule can be changed by individual agreement so that the employment may be terminated effective as of the 15th, or at the end of each calendar month.
Notice does require acknowledgment of receipt but is not requiring the consent of the employee. Furthermore, notice does not - except in the case of termination of employees enjoying special protection from termination - have to be made in writing. For evidentiary purposes it is however advisable to do so. In this case, the notice must be signed on behalf of the employer by the correct number of authorized representatives.
Please note that in plants in which at least five employees are regularly employed, and a works council has been established, all employees are entitled to some protection against ordinary termination. The employer must first notify the works council of the intended termination. The works council may then comment on the termination within one week. After that period the employer may proceed with the termination. A violation of the pre-notification requirement makes any termination void.
Termination By Reason Of The Employee's Age
An employer can terminate the employment relationship if the employee reaches the retirement age. However, the employee can fight against this termination before court. Generally, this appeal won’t be successful if the employee is already entitled to the statutory pension.
To succeed, the employee has to prove that he is not able to find new employment (with a comparable salary) within 12 to 14 months of termination, and that he depends on employment. If the employee can prove this, the employer has to prove that notice was given either for good reasons in the employee’s sphere (for example because the employee is not able to do his work any more) or for good reasons in the employer’s sphere (for example, the closure of the part of the business in which the employee was employed or because of an economic need to restructure).
Automatic Termination In Cases Of Force Majeure
Automatic termination in cases of force majeure only applies if continuation of the employment relationship is impossible. However, this is extremely rare.
The employer must inform the competent employment office in writing if the number of employees is to be reduced within 4 weeks by at least 5% in an establishment with at least 100 employees, and by at least 50 employees in an establishment with at least 1,000 employees. If the employer gives notice without having previously notified the employment office, the notice given is null and void (Kündigungsfrühwarnsystem).
Termination By Parties’ Agreement
Employment Agreements may be terminated by mutual consent between employee and employer at any time (Einvernehmliche Auflösung) . The parties are free to agree to terminate the employment relationship on any grounds and subject to whatever conditions they desire. Mutual termination does not have to be made in writing. Anyhow, it is advisable to establish a specific agreement regulating all conditions of the termination of the agreement (end date, vacation, severance pay etc).
Directors Or Other Senior Officers
There are no special rules regarding the termination of a director’s or other senior officer’s employment, but in the case of a statutory director (or other company officer), termination of employment does not automatically end the directorship. Separate steps will be required to bring the directorship to an end (pursuant to the company’s articles of association).
Special Rules For Categories Of Employee
Aside from compliance with the general provisions, the employer has to take into account whether the employee to whom notice of termination shall be given is subject to special protection against termination under applicable laws.
Persons enjoying special protection are, in particular, (a) apprentices, (b) expectant mothers, (c) mothers or fathers on parental leave, (d) persons doing military service or community service in lieu of military service, (e) members of the works council (f) members of the youth representative council, (g) disabled persons and (h) representatives of disabled employees.
These persons can effectively be terminated only on the grounds, in the manner and subject to the procedure laid down by law.
- Members of the works council may be subject to ordinary termination by providing notice only with the consent of the competent Labour Court. The court may grant an action brought by the employer for notice to a member of the works council only if the business or parts of the business will be shut down and if the member can no longer be employed, in case of incapacity of the member, making it unreasonable for the employer to continue the employment, or in case of persistent breach of duty, making it unreasonable for the employer to continue the employment for disciplinary reasons. Similar rules are in place for members of the youth representative council and representatives of disabled employees.
- Notice to a disabled person with special privileges (requires a 50 % disability and fulfillment certain aspects regarding nationality or status) can effectively be given only with the prior consent of the Disabled Persons Committee (Behindertenausschuss) .
- Unilateral termination of apprenticeship contracts by the employer requires the written form and is possible only on the grounds laid down by law. Lawful grounds of termination would be, for example, any criminal conduct of the apprentice or any physical or a (substantial) verbal insult against the employer or persons close to him, neglect or breach of statutory or contractual duties despite repeated warnings.
Specific Rules For Companies in Financial Difficulties
If an employer gets into financial difficulties and is not able to pay wages on the due date, the employees may instantly resign and may claim for damages.
There are specific rules for insolvent companies. Where insolvency proceedings have commenced, the receiver takes over running of the business. Employment agreements are not terminated automatically but have to be terminated by the receiver under the usual conditions as described above.
If a company or the assets of a company are sold during insolvency proceedings, rules concerning transfer of the employees from one employer to another as described above do not apply and employees do not have to be adopted by the new owner of the business.
Restricting Future Activities
Non-competition clauses are legally binding, if certain conditions are met. Such clauses are void if the employee was a minor when the clause was agreed upon and/or if the employee’s earnings for the last month of the employment agreement do not exceed a certain amount (currently EUR 3.700,-- gross for 2021 in case of agreement after December 29th 2015; before that date EUR 3.145,-- gross for 2021). The restriction must not last for more than one year, the clause has to define a limited geographical scope and it must not significantly hamper the employee’s ability to find new employment.
Usually the parties will agree on a contractual penalty payable in the event the employee breaches the non-competition clause. This penalty is subject to mitigation by the Labour and Social Court, which may not be excluded by contractual agreement. However, in case of a contractual penalty, the employer has not the right to insist on compliance with the post-contractual non-competition clause.
The duty of good faith (Treuepflicht) generally requires employees to notify the employer about any imminent danger that could cause severe damage to the employer. This general duty, however, does not comprise any further obligation to report misbehavior or breaches of duty of other associates unless specifically implemented.
More comprehensive notification or reporting duties can be implemented either by a shop agreement (Betriebsvereinbarung), by way of a directive of the management (Weisung) or on an individual contractual basis.
While in most cases the consent of the works council and, thus, the execution of a shop agreement will be required for the implementation of the (technical) reporting systems, there is no requirement to enter into such shop agreement for the imposition of the mere obligation to report misconduct on employees. Consequently, a (unilateral) directive issued by the management would suffice to commit all employees to report misconduct.
According to Sec 96 para 1 subpara 3 ArbVG, the implementation of technical systems and other means for monitoring associates which have an impact on human dignity require execution of a specific shop agreement.
The impact on human dignity by the whistleblowing system lies in the possibility for associates to report on misconduct anonymously. Employees may accuse colleagues without disclosing their own identity. Moreover, data can be collected both on the whistle-blower him/herself and on the person who is reported. This way of reporting misconduct is considered an impact on human dignity according to Sec 96 para 1 subpara 3 ArbVG. It is essential to conclude a shop agreement with the works council pursuant to Sec 96 para 1 subpara 3 ArbVG, as otherwise the installation of a whistleblowing-system (whistleblowing hotline) would not be permitted under Austrian law.
The use of a whistleblowing hotline, which has been installed without the consent of the works council, violates Austrian labour law. Employees may hold the employer responsible for all damages resulting from the unlawful use of the whistleblowing hotline.
Special Rules For Garden Leave
Employers can send employees on garden leave whenever they want to do so. However, the employees on garden leave are entitled to continuous payment of the salary and are not obliged to consume their vacation days.
Severance pay means an extra ordinary remuneration paid upon termination of employment. It is a form of "loyalty bonus" with the amount thereof depending on the duration of service.
The old severance payment regime (Abfertigung Alt) applied to all employment contracts which have been entered into before 1 January 2003, while the new regime (Abfertigung Neu) applies to all employment contracts entered into from 1 January 2003 onwards.
Old Regime (Abfertigung Alt)
Under the old regime, employees are entitled to severance payment in case of (i) termination of the employment by the employer, (ii) termination of the employment by the employee for good reason, (iii) mutual termination or (iv) unjustified dismissal. The amount of the severance payment depends on the duration of the employment and is calculated pursuant to Sec 23 Employment Act (Angestelltengesetz) which regulates a severance pay up to 12 months´ pay.
The severance payment is a direct payment obligation of the employer towards the employee. In case the amount of the severance payment exceeds three monthly salaries, such amount equaling three months salaries is due together with the monthly salary for the last month of service of the respective employee while the remaining amount exceeding this threshold may be paid in subsequent monthly instalments.
New Regime (Abfertigung Neu)
Under the new regime the employer pays monthly contributions in the amount of 1.53% of the monthly gross salary of the employee(s) into a specific state-owned employee provisions fund (Mitarbeitervorsorgekasse). Under the new regime employees are entitled to severance payment in case of termination irrespective of the reason for the termination and irrespective of whether the employment was terminated by the employer or the employee.
The severance payment is made out of the state-owned fund; there is no payment obligation of the employer towards the employee(s) upon termination with respect to severance payments.
If the employee themselves terminates the employment agreement or decides to leave the paid-in amount in the fund, they keep it and takes it with them to their new employer. If not withdrawn earlier, the paid-in amount is eventually paid out when the employee retires.
Special Tax Provisions And Severance Payments
Statutory severance payments are taxed at only 6%. If the parties agreed on additional severance payments on a contractual basis, these payments are subject to normal income tax.
Allowances Payable To Employees After Termination
Employers are not required to contribute to any allowances payable to employees after termination, as employers already contributed during the employment agreement through payment of unemployment insurance.
Time Limits For Claims Following Termination
The general limitation period of 3 years applies to claims arising from an employment agreement. Some collective and individual contracts shorten this period. However, according to judicature, the time limit cannot be reduced to less than three months.